Final answer:
A decreasing sales/assets ratio over time suggests a firm might be facing efficiency issues or declining demand, which could lead to long-term financial troubles and potential exit from the market. Factors such as increased competition, changing consumer preferences, and economic downturns might contribute to this situation.
Step-by-step explanation:
From a firm whose sales/assets ratio is decreasing over time, one can infer that it might be becoming less efficient in utilizing its assets to generate sales, or it could be facing decreasing demand for its products or services. This trend can often be a warning sign that the firm is heading towards operational difficulties or financial stress. If revenues are not sufficient to cover variable costs, a firm may continue operating in the short run to cover at least part of its fixed costs. However, if such a firm continues to incur losses in the long run, it may be forced to reduce production or exit the market altogether as part of a strategic decision to minimize further financial damage.
Several factors could contribute to this decline, including increased competition, changes in consumer preferences, or economic downturns. When firms face prolonged periods of such suboptimal performance, they must assess whether continuing operations is feasible or whether it would make more sense to cease production to prevent further losses.